See accompanying Notes to Financial
Statements which are an integral part of the financial statements.
See accompanying Notes to Financial Statements which are
an integral part of the financial statements.
See accompanying Notes to Financial Statements which are
an integral part of the financial statements.
NOTE 1Significant Accounting Policies
Invesco Trust for
Investment Grade New York Municipals (the Trust) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a diversified, closed-end management investment company.
The Trusts investment objective is to provide common shareholders with a high level of current income exempt from federal as well as
from New York State and New York City income taxes, consistent with preservation of capital. Under normal market conditions, the Trust will invest at least 80% of its total assets in New York municipal securities rated investment grade at the time
of investment.
The following is a summary of the significant accounting policies followed by the Trust in the preparation of its financial
statements.
A.
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Security Valuations
Securities, including restricted securities, are valued according to the following policy.
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Securities are fair valued using an evaluated quote provided by an independent pricing service approved by the Board of Trustees.
Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific
securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Debt obligations
are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Securities for which market quotations either are not readily available or became unreliable are valued at fair value as
determined in good faith by or under the supervision of the Trusts officers following procedures approved by the Board of Trustees. Some of the factors which may be considered in determining fair value are fundamental analytical data relating
to the investment; the nature and duration of any restrictions on transferability or disposition; trading in similar securities by the same issuer or comparable companies; relevant political, economic or issuer specific news; and other relevant
factors under the circumstances.
Valuations change in response to many factors including the historical and prospective
earnings of the issuer, the value of the issuers assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial
statements may materially differ from the value received upon actual sale of those investments.
13 Invesco Trust
for Investment Grade New York Municipals
B.
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Securities Transactions and Investment Income
Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on
the basis of specific identification of the securities sold. Interest income is recorded on the accrual basis from settlement date. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. Bond premiums and discounts are
amortized and/or accreted for financial reporting purposes.
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The Trust may periodically
participate in litigation related to Trust investments. As such, the Trust may receive proceeds from litigation settlements. Any proceeds received are included in the Statement of Operations as realized gain (loss) for investments no longer held and
as unrealized gain (loss) for investments still held.
Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of net realized and unrealized gain (loss) from investment
securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the net realized and unrealized gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation
of the Trusts net asset value and, accordingly, they reduce the Trusts total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations
and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Trust and
the investment adviser.
C.
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Country Determination
For the purposes of making investment selection decisions and presentation in the Schedule of Investments, the investment adviser may
determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country
in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuers securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination
are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been
determined to be the United States of America, unless otherwise noted.
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D.
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Distributions
The Trust declares and pays monthly dividends from net investment income to common shareholders. Distributions from net realized capital gain, if
any, are generally declared and paid annually and are distributed on a pro rata basis to common and preferred shareholders.
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E.
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Federal Income Taxes
The Trust intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue
Code), necessary to qualify as a regulated investment company and to distribute substantially all of the Trusts taxable earnings to shareholders. As such, the Trust will not be subject to federal income taxes on otherwise taxable income
(including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements.
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In addition, the Trust intends to invest in such municipal securities to allow it to qualify to pay shareholders exempt
dividends, as defined in the Internal Revenue Code.
The Trust files tax returns in the U.S. Federal jurisdiction and
certain other jurisdictions. Generally, the Trust is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
F.
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Interest, Facilities and Maintenance Fees
Interest, Facilities and Maintenance Fees include interest and related borrowing costs such as commitment fees, rating and
bank agent fees and other expenses associated with lines of credit and Variable Rate Muni Term Preferred Shares (VMTP Shares), and interest and administrative expenses related to establishing and maintaining Auction Rate Preferred Shares
(ARPS) and floating rate note obligations, if any.
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G.
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Accounting Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
(GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period
including estimates and assumptions related to taxation. Actual results could differ from those estimates by a significant amount. In addition, the Trust monitors for material events or transactions that may occur or become known after the
period-end date and before the date the financial statements are released to print.
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H.
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Indemnifications
Under the Trusts organizational documents, each Trustee, officer, employee or other agent of the Trust is indemnified against certain
liabilities that may arise out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts, including the Trusts servicing agreements, that contain a variety of
indemnification clauses. The Trusts maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. The risk of material loss as a result of such
indemnification claims is considered remote.
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I.
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Cash and Cash Equivalents
For the purposes of the Statement of Cash Flows the Trust defines Cash and Cash Equivalents as cash (including foreign currency), money
market funds and other investments held in lieu of cash and excludes investments made with cash collateral received.
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J.
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Floating Rate Note Obligations
The Trust invests in inverse floating rate securities, such as Residual Interest Bonds (RIBs) or Tender Option Bonds
(TOBs) for investment purposes and to enhance the yield of the Trust. Inverse floating rate investments tend to underperform the market for fixed rate bonds in a rising interest rate environment, but tend to outperform the market for
fixed rate bonds when interest rates decline or remain relatively stable. Such transactions may be purchased in the secondary market without first owning the underlying bond or by the sale of fixed rate bonds by the Trust to special purpose trusts
established by a broker dealer (Dealer Trusts) in exchange for cash and residual interests in the Dealer Trusts assets and cash flows, which are in the form of inverse floating rate securities. The Dealer Trusts finance the
purchases of the fixed rate bonds by issuing floating rate notes to third parties and allowing the Trust to retain residual interests in the bonds. The floating rate notes issued by the Dealer Trusts have interest rates that reset weekly and the
floating rate note holders have the option to tender their notes to the Dealer Trusts for redemption at par at each reset date. The residual interests held by the Trust (inverse floating rate investments) include the right of the Trust (1) to
cause the holders of the floating rate notes to tender their notes at par at the next interest rate reset date, and (2) to transfer the municipal bond from the Dealer Trusts to the Trust, thereby collapsing the Dealer Trusts.
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TOBs are presently classified as private placement securities. Private placement securities are subject to
restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the 1933 Act), or are otherwise not readily marketable. As a result of the absence of a public trading market for these
securities, they may be less liquid than publicly traded securities. Although these securities may
14 Invesco Trust
for Investment Grade New York Municipals
be resold in privately negotiated transactions, the prices realized from these sales could be less than those originally paid by the Trust or less than what may be considered the fair value of
such securities.
The Trust accounts for the transfer of bonds to the Dealer Trusts as secured borrowings, with the securities
transferred remaining in the Trusts investment assets, and the related floating rate notes reflected as Trust liabilities under the caption
Floating rate note obligations
on the Statement of Assets and Liabilities. The Trust records the
interest income from the fixed rate bonds under the caption
Interest
and records the expenses related to floating rate obligations and any administrative expenses of the Dealer Trusts as a component of
Interest, facilities and maintenance
fees
on the Statement of Operations.
The Trust generally invests in inverse floating rate securities that include
embedded leverage, thus exposing the Trust to greater risks and increased costs. The primary risks associated with inverse floating rate securities are varying degrees of liquidity and the changes in the value of such securities in response to
changes in market rates of interest to a greater extent than the value of an equal principal amount of a fixed rate security having similar credit quality, redemption provisions and maturity which may cause the Trusts net asset value to be
more volatile than if it had not invested in inverse floating rate securities. In certain instances, the short-term floating rate interests created by the special purpose trust may not be able to be sold to third parties or, in the case of holders
tendering (or putting) such interests for repayment of principal, may not be able to be remarketed to third parties. In such cases, the special purpose trust holding the long-term fixed rate bonds may be collapsed. In the case of RIBs or TOBs
created by the contribution of long-term fixed income bonds by the Trust, the Trust will then be required to repay the principal amount of the tendered securities. During times of market volatility, illiquidity or uncertainty, the Trust could be
required to sell other portfolio holdings at a disadvantageous time to raise cash to meet that obligation.
K.
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Other Risks
The value of, payment of interest on, repayment of principal for and the ability to sell a municipal security may be affected by constitutional
amendments, legislative enactments, executive orders, administrative regulations, voter initiatives and the economics of the regions in which the issuers are located.
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Since many municipal securities are issued to finance similar projects, especially those relating to education, health care,
transportation and utilities, conditions in those sectors can affect the overall municipal securities market and a Trusts investments in municipal securities.
There is some risk that a portion or all of the interest received from certain tax-free municipal securities could become taxable
as a result of determinations by the Internal Revenue Service.
NOTE 2Advisory Fees and Other Fees Paid to Affiliates
The Trust has entered into a master investment advisory agreement with Invesco Advisers, Inc. (the Adviser or Invesco). Under the terms of
the investment advisory agreement, the Trust pays an advisory fee to the Adviser based on the annual rate of 0.55% of the Trusts average daily managed assets. Managed assets for this purpose means the Trusts net assets, plus assets
attributable to outstanding preferred shares and the amount of any borrowings incurred for the purpose of leverage (whether or not such borrowed amounts are restated in the Trusts financial statements for purposes of GAAP).
Under the terms of a master sub-advisory agreement between the Adviser and each of Invesco Asset Management Deutschland GmbH, Invesco Asset
Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Affiliated Sub-Advisers) the Adviser,
not the Trust, may pay 40% of the fees paid to the Adviser to any such Affiliated Sub-Adviser(s) that provide(s) discretionary investment management services to the Trust based on the percentage of assets allocated to such Sub-Adviser(s).
The Adviser has contractually agreed, through at least August 31, 2014, to waive advisory fees and/or reimburse expenses to the extent
necessary to limit the Trusts expenses (excluding certain items discussed below) to 0.69%. In determining the Advisers obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and
could cause the Trusts expenses to exceed the limit reflected above: (1) interest, facilities and maintenance fees; (2) taxes; (3) dividend expense on short sales; (4) extraordinary or non-routine items, including
litigation expenses; and (5) expenses that the Trust has incurred but did not actually pay because of an expense offset arrangement. Unless the Board of Trustees and Invesco mutually agree to amend or continue the fee waiver agreement, it will
terminate on August 27, 2014. To the extent that the annualized expense ratio does not exceed the expense limitation, the Adviser will retain its ability to be reimbursed for such fee waivers or reimbursements prior to the end of each fiscal
year.
For the six months ended August 31, 2013, the Adviser waived advisory fees of $536,914.
The Trust has entered into a master administrative services agreement with Invesco pursuant to which the Trust has agreed to pay Invesco for
certain administrative costs incurred in providing accounting services to the Trust. For the six months ended August 31, 2013, expenses incurred under this agreement are shown in the Statement of Operations as
Administrative services
fees
.
Certain officers and trustees of the Trust are officers and directors of Invesco.
NOTE 3Additional Valuation Information
GAAP defines fair value
as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the
inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market
prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investments
assigned level:
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Level 1
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Prices are determined using quoted prices in an active market for identical assets.
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Level 2
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Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities,
interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others.
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Level 3
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Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end
of the period), unobservable inputs may be used. Unobservable inputs reflect the Trusts own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best
available information.
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15 Invesco Trust
for Investment Grade New York Municipals
As of August 31, 2013, all of the securities in this Trust were valued based on Level 2 inputs
(see the Schedule of Investments for security categories). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of
valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.